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Workforce Holdings Ltd FY 2012 results
 

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Workforce Holdings Ltd FY 2012 results

Workforce Holdings Ltd FY 2012 results

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Workforce Holdings Ltd FY 2012 results Document Transcript

  • 1. WORKFORCE HOLDINGS LIMITED Incorporated in the Republic of South Africa (Registration number: 2006/018145/06) Share code: WKF ISIN: ZAE000087847 ("Workforce" or "the company" or "the group") Abridged audited condensed consolidated financial results for the year ended 31 December 2012 and notice of annual general meeting HIGHLIGHTS Revenue increase of 11% EBITDA increase of 5,8% Group statement of comprehensive income for the year ended 31 December 2012 Revenue Cost of sales Gross profit Operating costs Earnings before impairment, depreciation, amortisation, interest and taxation ("EBITDA") Depreciation and amortisation of non-financial assets Operating profit Finance income Finance costs Profit before taxation Taxation Profit for the year Other comprehensive income for the year, net of tax: Fair value (loss)/gain on available-for-sale financial assets Total comprehensive income for the year Profit for the year attributable to: Owners of the parent Non-controlling interests Notes 9 2011 R'000 1 348 561 (1 039 586) 308 975 (267 974) 41 001 (7 694) 33 307 3 434 (10 896) 25 845 (1 916) 23 929 (462) 23 082 139 24 068 23 185 359 23 544 23 445 484 23 929 22 723 359 23 082 23 584 484 24 068 10 10,3 10,4 Notes 2012 R'000 2011 R'000 Total comprehensive income attributable to: Owners of the parent Non-controlling interests Earnings per share (cents per share) Basic and fully diluted 2012 R'000 1 498 435 (1 173 636) 324 799 (281 418) 43 381 (8 939) 34 442 2 670 (12 463) 24 649 (1 105) 23 544 Group statement of financial position at 31 December 2012 Assets Non-current assets Property, plant and equipment Goodwill Intangible assets Deferred tax assets Other financial assets Current assets Trade and other receivables Inventories Taxation Cash and cash equivalents Total assets Equity and liabilities Equity Equity attributable to owners of the parent Share capital and premium Treasury shares Reverse acquisition reserve Available-for-sale reserve Retained earnings Non-controlling interests Non-current liabilities Financial liabilities Deferred tax liabilities Current liabilities Trade and other payables Financial liabilities Taxation Bank overdraft Total equity and liabilities Group net asset value per share (cents per share) 5 6 7 81 7 41 17 13 1 438 415 3 1 18 520 220 220 236 (7 (125 534 657 280 224 757 616 959 712 198 523 526 493 352 101 867 616) 499) (231) 116 580 251 14 282 9 124 5 158 285 859 72 935 207 893 565 4 466 520 493 98 76 9 41 13 11 2 371 351 3 925 187 280 165 215 078 317 136 343 861 15 977 448 242 197 197 236 (7 (125 93 13 9 3 237 62 175 448 487 378 867 616) 499) 231 395 109 091 153 938 664 521 139 4 242 87
  • 2. Group statement of changes in equity for the year ended 31 December 2012 Balance at 1 January 2011 Payment of dividends Total comprehensive income for the year Balance at 1 January 2012 Payment of dividends Total comprehensive income for the year Balance at 31 December 2012 Notes * Fair value gains on available-for-sale financial assets. Balance at 1 January 2011 Payment of dividends Total comprehensive income for the year Balance at 1 January 2012 Payment of dividends Total comprehensive income for the year Balance at 31 December 2012 Attributable to owners of the parent Share capital Reverse and acquisition Treasury premium reserve shares R'000 R'000 R'000 236 867 (125 499) (7 616) 236 867 (125 499) (7 616) 236 867 (125 499) (7 616) 9 9 Availablefor-sale reserve R'000 92 139 231 (462) (231) * Noncontrolling interests R'000 10 (385) 484 109 (217) 359 251 Total equity R'000 173 804 (385) 24 068 197 487 (217) 23 082 220 352 2012 R'000 31 214 43 555 2 646 (12 463) (2 524) (54 017) (22 803) (11 224) 24 (2 714) (321) 381 (8 594) 32 114 32 331 (217) 2011 R'000 30 428 40 932 3 271 (10 896) (2 879) (65 751) (35 323) (10 349) (75) 163 (4 245) (151) 593 (6 634) 14 200 14 585 (385) (1 913) 15 973 14 060 (31 472) 47 445 15 973 Retained earnings R'000 69 950 23 445 93 395 23 185 116 580 Total R'000 173 794 – 23 584 197 378 – 22 723 220 101 Group statement of cash flows for the year ended 31 December 2012 Cash generated from operations before net working capital changes Cash generated from operations Finance income Finance costs Taxation paid Increase in net working capital Cash flows from operating activities Cash flows from investing activities Acquisition adjustment to purchase price of subsidiary previously acquired Dividends received Property, plant and equipment acquired - maintaining operations - expanding operations Proceeds on disposal of property, plant and equipment Intangible assets acquired Cash flows from financing activities Proceeds from borrowings Dividends paid to shareholder in subsidiary Net change in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2012 1. Nature of business Workforce Holdings Limited is an investment holding company. Its subsidiaries carry on the business of staff and recruitment, training and consulting, financial and lifestyle products, employee health management and process outsourcing. 2. Basis of preparation The condensed group financial statements for the year ended 31 December 2012, have been prepared in accordance with the framework concepts and the measurement and recognition of International Financial Reporting Standards, the Listing Requirements of the JSE Limited ("JSE"), International Accounting Standard (IAS) 34, Interim Financial Reporting and the South African Companies Act. No 71 of 2008, as well as the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council. The condensed group financial statements for the year ended 31 December 2012 were compiled under the supervision of WP Van Wyk CA (SA), The group financial director. The accounting policies have been consistent with those of the most recent financial statements. During the period under review, the group adopted all the IFRS and interpretations being effective and deemed applicable to the group. None of these standards and interpretations had a material impact on the results. 3. Events after reporting date No material events occurred between the reporting date and the date of approval of these condensed group financial statements. 4. Auditor's report The external independent auditor, Horwath Leveton Boner, have issued their opinion on the group financial statements for the year ended 31 December 2012. The audit was conducted in accordance with International Standards of Auditing. The auditor has issued an unqualified audit opinion. A copy of the audit report is available for inspection at the company's registered offices. These condensed financial statements have been derived from the group financial statements and are consistent, in all material respects, with the group financial statements.
  • 3. 5. Additions and disposals of property, plant and equipment Carrying value at 1 January 2011 Additions Disposals Reclassifications Depreciation Carrying value at 31 December 2011 Additions Disposals Depreciation Carrying value at 31 December 2012 Motor vehicles R'000 2 720 672 (470) (1 061) 1 861 583 (535) (808) 1 101 Carrying value at 1 January 2011 Additions Disposals Reclassifications Depreciation Carrying value at 31 December 2011 Additions Disposals Depreciation Carrying value at 31 December 2012 Computer equipment R'000 1 729 1 734 (1) 594 (1 130) 2 926 1 189 (18) (1 733) 2 364 Industrial equipment R'000 321 (80) (59) 182 10 (59) 133 Office equipment R'000 2 511 1 170 (51) (514) (1 306) 1 810 967 (2) (657) 2 118 Leasehold improvements R'000 202 258 (80) 380 89 (92) 377 Training manuals R'000 2 416 562 (1) (949) 2 028 591 (1 055) 1 564 Total R'000 9 899 4 396 (523) (4 585) 9 187 3 429 (555) (4 404) 7 657 2012 R'000 6. 7. 41 280 41 280 Goodwill Carrying value at the beginning of the year Adjustment of purchase price Carrying value at the end of the year 2011 R'000 41 205 75 41 280 Intangible assets The carrying amounts of intangible assets can be reconciled as follows: Computer software R'000 9 640 6 634 (3 109) 13 165 8 594 (4 535) 17 224 Carrying value at 1 January 2011 Additions Amortisation Carrying value at 31 December 2011 Additions Amortisation Carrying value at 31 December 2012 8. Segment reporting The group's segmental analysis is based on the following five core business segments: - Staffing and Recruitment comprises staff outsourcing which provides human resources to clients on both a short- and long-term basis, recruitment and specialist staffing, which includes permanent and temporary placements, ad-response handling, executive search, call centre staffing and importing and exporting of skills; - Training and Consulting, which responds to market demands as a Private Further Education and Training ("FET") provider; - Financial and Lifestyle Products, which offers a range of lifestyle products and support services to employees; - Employee Health Management, which offers a comprehensive range of occupational and primary health management services; and - Process Outsourcing, which focuses on delivering productive and functional business process outsourcing solutions, including the statutory and legal elements associated therewith. These operating segments, as further described in the accounting policies in the annual report, are monitored and strategic decisions are made on the basis of adjusted segment operating results. The format in which segmental information is presented to the chief operating decision-maker was changed, hence the format of the prior period numbers was changed. Furthermore income and expenses not previously allocated have now been allocated across segments. Segment information can be analysed as follows for the reporting periods under review: Staffing and Recruitment R'000 2012 Segment revenues 1 360 103 Cost of sales (1 102 190) Operating costs (184 580) EBITDA 73 333 Depreciation and amortisation of non-financial assets (2 247) Segment operating profit 71 086 Capital expenditure 3 513 Segment total assets 288 171 Segment total liabilities (40 352) Net segment assets 247 819 Training and Consulting R'000 39 (10 (33 (3 (1 (5 613 405) 186) 978) 286) 264) 936 4 982 (3 009) 1 973 Financial and Lifestyle Products R'000 50 (17 (18 14 (1 12 3 97 (17 79 088 761) 015) 312 866) 446 284 403 906) 497 Employee Health Management R'000 23 (9 (12 1 513 580) 449) 484 (177) 1 307 325 5 901 (1 403) 4 498
  • 4. Segment information can be analysed as follows for the reporting periods under review: Process Outsourcing R'000 2012 Segment revenues 47 109 Cost of sales (33 700) Operating costs (13 165) EBITDA 244 Depreciation and amortisation of non-financial assets (272) Segment operating profit (28) Capital expenditure 306 Segment total assets 1 037 Segment total liabilities (598) Net segment assets 439 2011 Segment revenues Cost of sales Operating costs EBITDA Depreciation and amortisation of non-financial assets Segment operating profit Capital expenditure Segment total assets Segment total liabilities Net segment assets Staffing and Recruitment 1 221 (986 (177 57 (2 54 2 250 (65 184 993 792) 916) 285 630) 655 767 444 929) 515 Process Outsourcing Central cost R'000 (42 (42 (3 (45 3 122 (236 (113 014) 014) 091) 105) 659 999 873) 874) Training and Consulting 29 (5 (21 2 (1 1 264 479) 458) 327 236) 091 466 11 112 (1 693) 9 419 Central cost Consolidation entries R'000 (21 991) 21 991 Financial and Lifestyle Products 45 (12 (14 18 (1 17 3 75 (2 73 386 264) 542) 580 334) 246 971 194 131) 063 Total R'000 1 498 435 (1 173 636) (281 418) 43 381 (8 939) 34 442 12 023 520 493 (300 141) 220 352 Employee Health Management 21 (8 (11 1 285 318) 054) 913 (123) 1 790 91 3 992 (897) 3 095 Consolidation entries Total 2011 Segment revenues 41 010 (10 377) 1 348 561 Cost of sales (26 733) (1 039 586) Operating costs (12 761) (40 620) 10 377 (267 974) EBITDA 1 516 (40 620) 41 001 Depreciation and amortisation of non-financial assets (275) (2 096) (7 694) Segment operating profit 1 241 (42 716) 33 307 Capital expenditure 133 3 602 11 030 Segment total assets 1 527 105 973 448 242 Segment total liabilities (149) (179 956) (250 755) Net segment assets 1 378 (73 983) 197 487 No segmental information is provided in respect of geographical analysis as the group operates primarily in South Africa. 9. Taxation The tax rate for the year can be reconciled as follows: Standard corporate tax rate Adjusted for: Non-deductible expenses Tax allowances Prior year tax losses now recognised Prior year tax adjustments STC Unused tax losses Effective tax rate 10. Earnings per share Basic earnings per share The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows: Profit attributable to equity shareholders of the parent company (R'000) Weighted average number of ordinary shares in issue ('000) Basic earnings per share (cents) Diluted earnings per share There are no potential dilutive shares therefore diluted earnings per share equates to basic earnings per share. Headline earnings per share The earnings used in the calculation of headline earnings per share are as follows: Profit attributable to equity shareholders of the parent company (R'000) Headline earnings adjustment (R'000) (Loss)/gain on disposal of property, plant and equipment Tax effects of adjustments Total headline earnings (R'000) Weighted average number of shares in issue ('000) Headline earnings per share (cents) 2012 % 2011 % 28,00 28,00 0,20 (22,44) (1,31) 0,03 4,48 0,13 (23,37) 0,36 0,29 2,00 7,41 23 185 225 630 10,3 23 185 125 174 (49) 23 310 225 630 10,3 11. Dividends No dividends were declared relating to the period under review (2011: Nil). 12. Business combinations No business combinations occurred during the period under review. 13. Related party transactions The group, in the ordinary course of business, entered into various sale and purchase transactions with related parties. 23 445 225 630 10,4 23 445 (50) (69) 19 23 395 225 630 10,4
  • 5. 13.1 Transactions with related parties During the year the group entities entered into the following trading transactions with related parties that are not members of the group: 2012 2011 R'000 R'000 11 Wellington Street Investments Proprietary Limited 4 392 4 063 Relationship: Director has significant influence Type of transaction: Operating lease rentals paid Vunani Capital Proprietary Limited 121 121 Relationship: Shareholder Type of transaction: Designated advisers' fees Hunts Attorneys 3 031 2 391 Relationship: Director with an interest in a legal practice - R S Katz Type of transaction: Disbursements for advocates' fees paid 14. Contingent liabilities Third party claims Various legal claims were brought against the group during the year. Unless recognised as a liability, the directors consider these claims to be unjustified and the probability that they will require settlement at the group's expense to be remote, since the claims are not in accordance with either the contracts with the customers or normal business practices in the industry. This evaluation is consistent with external independent legal advice. Potential claims by third parties amount to R2 696 556 (2011: R1 739 248). The directors believe, based on past history, that the likelihood of such claims being successful are minimal. 15. Directors' Commentary The year ended December 2012 was a challenging year for Workforce and the human resources services sector as a whole. The macro environment proved very challenging with protracted violent labour unrest which, at points, threatened the core of the current labour relations and social systems. Our industry is in a process of adapting to expected changes emanating from various proposed amendments to labour legislation. It has been, and continues to be our view that the amendments will result in the further entrenchment of the staff outsourcing value proposition - fostering greater flexibility and security within the three-dimensional employment relationships. We continue to embrace these changes in the most innovative way so as to ensure that we are able to continue providing our clients with all the benefits associated with the utilisation of flexible staffing. As reported on in our 2011 report, the restructuring of our business into five focus areas comprising staffing and recruitment, financial and lifestyle products, training and consulting, process outsourcing and employee health management, has yielded varying levels of success; and 2012 has provided us with numerous lessons learned which we will build on and look to capitalise on during 2013. Operational and financial review The year under review produced average results with some segments performing better than expectation, while others performed below management expectation. Group revenue of R1,5 billion (FY2011: R1,35) was 11% ahead of the prior year while earnings per share of 10,3 cents (FY2011: 10,4 cents) was 1% down on last year. Operating costs increased by 5%. The results saw an increase in EBITDA to R43,4 million (FY2011: R41 million) representing an increase of 5,9%. Working capital management and debtors remained a management focus area - average Debtors Days Outstanding decreased to 56 days from 58 days in 2011. The group's debt to equity ratio of 0,91 was slightly higher than the previous year of 0,85, which management believe is acceptable at current levels of trading. Staffing and recruitment The staffing and recruitment segment of the group showed strong growth. Revenue increased by 11,5% to R1,36 billion. This was matched by a 28% increase in EBITDA to R73,4 million. This was achieved as a result of tight management of operating costs which increased marginally by 3,7%. The staff outsourcing segment of the business showed strong market share growth specifically within the industrial blue collar segments. Investment in business development skills over the past three years is fuelling this growth. The group's objective of protecting and growing market share within its core segments will continue to receive primary focus. Workforce Staffing added an additional three branches during the year, bringing our national footprint to 49 branches. Further development has also taken place in Lesotho and Mozambique - with established infrastructure across these territories. Plans are currently in place to establish a presence in Zimbabwe. Skills shortages within the white collar segment of industry remained a challenge and our niche businesses within this segment were able to capitalise on these opportunities. Telebest group performed above expectation and contributed a material increase in EBITDA of R7,8 million, (FY2011: R2,3 million). Albrecht Nursing Agency extended its reach through the establishment of branches in the Gauteng and Kwazulu-Natal regions. Training and consulting Training and skills development is a national priority in our country and the group's training subsidiary is well positioned to respond to market demands. Training Force has undergone a major restructure which has included a reorganisation of executive management, further decentralisation of operating units and operational cost reductions. These changes, we believe, will result in a more sustainable business model delivering greater profitability and greater focus on the client's value proposition. The challenges experienced during 2012 resulted in negative EBITDA of R4,0 million. Financial and lifestyle products The group's wholly owned subsidiary, Babereki Employee Support Services and its trading division Dreams Direct, provides a range of lifestyle products and services to employees. Babereki has become an important contributor to the group's earnings. The business is extremely reliant on system integration and development and 2012 saw the roll out of our third generation systems enabling more efficient control of credit granting and collection processes. The business reported a decrease in EBITDA of 23% to R14,3 million. This was primarily as a result of increased operational overheads specifically in the area of risk management and collections. Added to this, additional resources have been employed to bolster the current system development team's capability.
  • 6. Employee health management Workforce Healthcare is making slow progress in developing and growing its market share. Organisations are becoming more sensitised to the importance of workplace wellness and the impact that early identification and management of risk has on increasing productivity, reducing absenteeism and positively influencing the wellbeing of their employees when managed correctly. Wellness and assistance programmes are currently provided to approximately 26 500 employees nationally. In addition to this, the division also provides employers with a comprehensive range of occupational and primary health management services, with some 53 500 medicals conducted during 2012 through its network of 42 on-site clinics. Revenue increased by 10,5% to R23,5 million. This benefit associated with this increase was absorbed by an increase in operating expenditure of 12,6% which resulted in a marginal decrease in EBITDA to R1,5 million for year ended 2012. Management believe that with continued focus, progress in gaining market share will be achieved in the forthcoming year. Process outsourcing The group's process outsourcing segment, managed to increase revenue by 14,9% to R47,1 million. However gross margins fell by 6,3% as a result of increased competition, specifically in the Programmed Construction business. EBITDA decreased by R1,2 million resulting in a close to break-even result for the year. Management are currently reviewing the operations of the respective businesses in this segment and a refocused strategy will be implemented during 2013, which will see this segment return to profitability. Sustainability We are committed to effective risk management and recognise the importance of this to our sustainability. Material issues and risks get identified through a rigorous process of interaction with a broad range of stakeholders across our organisation. This strategy is driven from the bottom to top and vice-versa which gives us a deep understanding of various risks across our business. Strategy The group's integrated value proposition involves aligning and integrating our diverse yet interdependent businesses to create a seamless solution for our clients. Our competitive advantage is our ability to execute on this value proposition utilising our technology and systems. We enable this through a decentralised business model - which we believe gives us greater exposure to our various markets. This model has been deployed across all of our businesses with varying degrees of success. Key imperatives which make this model sustainable include: developing an innovative and entrepreneurial culture across the organisation; maintaining deep areas of knowledge and specialisation of and within markets; being able to offer diversified yet integrated products and services; and, developing depth in both general and operational management. These key imperatives will form the basis of delivering on our strategic objectives. Liquidity The group will continue to focus on its liquidity management and through various initiatives will look to enhance processes and systems that are already in place. Liquidity as measured by the current ratio is 1,54 - management believe however that this needs to improve in order to enable the group to take advantage of market opportunities as they present themselves. The group's net financing charge increased to R9,8 million from R7,4 million the previous year. This is predominantly as a result of increased turnover and investment in debtors. In addition to this, Babereki secured its own ring-fenced funding structure which has added to the cost. Technology Technology is at the forefront of enabling us to provide our clients with value over and above our competitors. Our ongoing investment in employer-centric technology is driven through our internal development teams who typically have a deep understanding of the various businesses and their respective requirements. Various new developments have been piloted for full roll out during 2013. This includes our proprietary system, Worktrac Zone which among others, enables clients to optimise work processes and staffing requirements across multiple sites and categories of staff. Regulation Indications are that government will continue to press on with its law reforms this year with the clear intention to finalise the amendment processes by the end of the year; this specifically includes the amendments to the Basic Conditions of Employment Act, Labour Relations Act, Employment Equity Act and the new Employment Services Bill. Whilst the introduction of these laws will place its own demand on the group's internal requirements, the reality is that the group is awaiting the introduction of these amendments with certain eagerness. The nature of the amendments is such that it will create a need for the services of the group which will give the group further development opportunities. Workforce has over the last year continued with its programme to develop forward thinking systems, improve skills development and find cost effective ways to increase production. Its current development has placed Workforce in the lead when it comes to the ability to assist its clients to successfully adapt to the changes that businesses will be required to meet over the coming year. Outlook The group is confident that its current strategy will result in the achievement of its stated objectives. Continued investment in people and systems has proven to be the primary driver of success in its core business. This will continue and will be augmented by additional investment. Legislative challenges are being addressed both strategically and operationally and the group is well prepared for these changes. We look forward to a challenging yet rewarding 2013. Directorate There have been no changes to the board during the period under review. Annual General Meeting The company's annual general meeting will be held at 11 Wellington Road, Parktown, Johannesburg on Thursday, 10 May 2013 at 10:00. The financial statements for the year ended 31 December 2012, incorporating a notice of annual general meeting, will be mailed to all shareholders on or about 28 March 2013. For and on behalf of the board RS Katz (Executive chairman) LH Diamond (Chief executive officer) WP van Wyk (Group financial director) Johannesburg 27 March 2013
  • 7. Executive directors RS Katz, LH Diamond, WP van Wyk Non-executive directors NM Anderson, JR Macey*, L Letlape*, K Vundla* * Independent. Designated Adviser Merchantec Capital Company secretary Sirkien Van Schalkwyk Registered office The registered office, which is also its principal place of business, is 11 Wellington Road, Parktown, 2193 Transfer secretaries Link Market Services South Africa Proprietary Limited Auditors Horwath Leveton Boner